State Guaranty Fund

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State Guaranty Fund

A fund administered by the government of a U.S. state protecting policyholders and pensioners from the default of an insurance company. That is, if an insurance company is licensed to operate in a given state, policyholders within that state are protected because, if the company defaults on its payments, the state guaranty fund will pay the policyholder instead. Insurance companies pay a small percentage of their revenues to different states to finance state guaranty funds.

Seven non-life insurance companies became insolvent in the second quarter of 2013--two more than the total number of liquidations in 2012, shows a report by the National Conference of Insurance Guaranty Funds (NCIGF).

Over recent decades, guaranty funds have been introduced when a country's insurance sector has assisted, in a cooperative effort with the regulator, in the liquidation of one (or more) defaulting companies.

Based on the rules governing the re-house firms, each new outlet of the re-house firms has to turn in operating guaranty of NT$250,000 (US$8,065) to the Real Estate Agents Transaction Guaranty Foundation and at the end of 2010 such guaranty funds accumulated to NT$13.

This settlement is conditioned upon its adoption by at least 35 of the remaining 43 states and the District of Columbia by March 1, 2011, and settlements of AIG's pending litigation with insurer members of the workers compensation residual market and separate claims by insurance guaranty funds.

In practice, annual assessments of solvent insurers by guaranty funds are limited to a small percentage of an insurer's state premium volume, with additional assessments, if needed, following in future years.

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